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There are many sources of finance that could potentially be available to businesses, but knowing which is the best one for you – whether it’s for help with day-to-day cash flow, investing in a larger purchase or fuelling exciting growth plans – can be tricky. Here are some of the main options to consider.

Bank financing

For many businesses, the first port of call when seeking business financing will be their bank. One reason for that is the guidance that banks will be able to give. Because of the knowledge they’re likely to have about you and your business, they can help to quickly identify the most appropriate sources of funding. Of course, banks themselves have a range of options available. These include

Unsecured business loans: A straightforward way of borrowing money, with fixed repayments (including interest) over a set period of time. Loans are most suitable for medium to long-term plans. Barclays could provide up to £100,000 in unsecured lending, and in most cases pre-approved businesses are able to access the money within days. Loans of up to £25,000 can be with you within just 24 hours. Interest rates and the amount you can borrow will depend on your circumstances and the individual bank.

Secured business loans: As well as unsecured borrowing, you can also use a range of your company’s assets, including property, inventory or equipment, as security for a loan. This can be an effective way of raising cash for working capital or investment. The amount you could borrow will depend on the value of the asset. Secured loans will usually offer a lower rate of interest than unsecured borrowing, while unsecured loans allow you to borrow without placing assets at risk of repossession.

If you're looking to buy or remortgage business premises, there are several products that could be available to you including buy-to-let loans for business and commercial mortgages. You might also consider talking to a Commercial Finance Broker or a Barclays Business Manager – they will provide guidance, take you through the options available to you and deal directly with the lender on your behalf.

Overdrafts: These are more suitable for day-to-day requirements rather than for fuelling the growth ambitions of established companies. They can be useful in helping to provide financial support when your business needs it most. Barclays offers unsecured overdrafts up to £50,000, and secured overdrafts for larger amounts.

Business credit cards1: These are most effective when used in a similar way to overdrafts and are best suited to day-to-day needs. They can provide a lifeline when waiting to harvest the fruits of your business investments.

Invoice finance2: We’ve partnered with MarketInvoice to give you access to a range of quick and easy online invoice finance solutions. Invoice finance gives you the power to unlock cash tied up in your outstanding invoices and can provide an ongoing solution that grows with your business. It’s ideal if you have long payment terms, or if your business is growing and you’re looking for money to help you seize new opportunities.

Asset finance1: This helps you to fund the purchase of an asset. It allows you to spread the cost through regular repayments and means you don’t have to use valuable working capital to pay a lump sum up front. Asset Finance can be a good way to preserve capital and generate an income from an asset while you’re paying for it.

Government-supported borrowing

The government could also help your business to secure necessary funding through a variety of measures, including

Enterprise Finance Guarantee: The Enterprise Finance Guarantee (EFG) could help you to raise funding if you have insufficient security to satisfy a lender’s requirements. Backed by the government-owned British Business Bank, the EFG provides a guarantee for 75% of the outstanding facility balance (although it’s important to remember that you will still be liable for 100% of the loan). Eligible businesses can borrow between £25,001-£600,000 over a period of 3 months-10 years, or £600,000-£1.2m to be repaid over a 3 month-5 year period.

Business grants: The government provides a range of grants for small businesses, which are administered by several different bodies. Most are linked to specific activities, such as research and development, and while they don't have to be repaid you will have to meet strict qualification criteria. Find out more about the support that could be available for your business.

Family and friends

You could turn to family and friends to help provide funding for your business, but there are important pros and cons to be aware of.

One of the main benefits could be flexibility over repayments, as well as providing additional finance on top of what you can borrow more formally elsewhere (as long as you are able to service all the repayment obligations you have made).

But you – and your investors – should understand the commitments being made by all parties. Any ambiguities could risk damaging your relationship in the future, so it’s advisable to draw up a formal contract with help from an independent solicitor.

External investors

Offering a share of your company (or equity) for an investment by a third party could be an effective way to raise cash. In contrast to a business loan from a bank, you may not have to make any repayments on the money invested.

However, so-called Angel Investors (wealthy individuals who back businesses with their own money) and Venture Capitalists can strike a hard bargain in terms of the share of your company they take in return for their investment.

Alternative investment

In recent years, a number of alternative financing opportunities have been developed that could be suitable for your business. These include

Crowdfunding: This is where businesses raise small amounts of money from lots of people, via specialist online platforms. In exchange for the cash, businesses can promise a range of things such as early access to products, discounts or equity stakes in the business. Crowdfunding can be used for purposes as diverse as funding a small project to getting a new business off the ground, but with many businesses fighting for attention it can be hard to successfully raise the money you might be looking for.

Peer-to-peer lending: This combines aspects of traditional lending and crowdfunding together, with specialist online platforms allowing businesses to take out loans funded by many individual small investors. The criteria for borrowing in this way can be less strict than traditional banks, while you may also be able to borrow more and get your hands on the cash more quickly. But costs are not always lower than they would be for a traditional business loan from a bank.

Preparing for funding

Knowing that you want funding for growth is only one part of the process. Your business also needs to be ready and able to satisfy the potentially diverse requirements of those that might lend to you.

With that in mind, here’s a checklist of three important points to tick off that could help increase your chances of success.

1. You know what type of funding you want

Doing your research can really pay dividends when it comes to business financing. Weighing up the pros and cons of all the options – in advance – can be crucial to a successful outcome.

That’s partly down to how you’ll look when applying for finance. If you’re clear-headed about your funding needs and how you want them to be met, it can help to give people more confidence in lending to you. At the very least, it can speed up the process and help prevent you from wasting time and energy on things that won’t work for you or your business.

But this consideration stage should also focus on your own requirements too, both now and in the future. For example, borrowing from a family member may seem like an easy source of funding initially, and for many businesses it might be the most suitable option. Yet it won’t help you to build up the kind of credit rating that could help to unlock further financing needs as your business develops.

If you bank with Barclays, as we get to know your business we’ll give you a provisional unsecured borrowing limit, which we update daily. This helps us to make a quick decision on funding requests, and often requires you to answer just a few questions in order to get your funding. If we don’t have a provisional limit for you, we may need to ask for additional information such as details on your business performance.

Knowing that you’ve gone through a thorough evaluation process and come to a decision helps you – and any potential investors – feel more confident that the business is ready to take on the type of funding you are considering.

2. You have a good credit rating

Being able to show your creditworthiness could, in most cases, be a key factor in securing funding for your business. But how do you make sure yours is in top condition before approaching potential lenders? Check out these tips on helping to boost your score.

Understand what it is: The first step to a decent credit score is knowing what it is and why it’s important. Having this in mind will help you take the steps you need to look after it, which will hopefully serve you well when it comes to securing finance.

Sort out any incorrect information: Monitor your credit score regularly and, if you find something wrong, take immediate steps to correct it. Don’t wait until you need to make a borrowing application.

Tackle anything harming your score: If you see that something within your control is harming your rating – for example if you’re late with payments or you haven’t filed your company accounts when you should have done – take immediate steps to resolve the issue.

Be careful who you work with: Research customers and suppliers as best you can, checking their credit ratings if appropriate. If they suffer difficulties it could have a knock-on effect on your own business and your credit rating.

Don’t apply too frequently: Having lots of applications on your file in a short space of time can look like the business is in trouble financially – even if it isn’t.

Don’t be afraid of credit: Showing your business can handle credit effectively can boost your score. Having a (good) credit history can be a positive.

Don’t neglect your personal rating: Your business credit rating is distinct from your personal one. But in some circumstances credit rating agencies can consider your personal history, particularly for startups without much credit history of their own.

3. You know how to approach potential investors

Getting this right can help prevent wasted time and lost opportunities. It’s essential that you can present your business as a viable investment opportunity.

The best time to approach lenders is as soon as you’ve started to think about your growth plans. Not only can this help to shape your strategy more fully, but lenders may also feel more confident if they’ve been involved in discussions from an early stage.

You should also be specific about what the money is needed for, how you’ll pay your investors back and how long it will take you to do so. And be prepared to answer in-depth questions about your business – potential lenders will want to feel comfortable that your ambitions are being built on firm foundations.

Different lenders will have varying criteria for business funding, so research this in advance and make sure you can satisfy them.

But regardless of who you’re planning to borrow from and the type of lending you’re looking for, it’s essential that you’re clear on your own side of the deal, whether that’s the assets you’re prepared to offer up as security or how much of an equity stake you’d be comfortable giving up.

Making a successful pitch

There’s no foolproof method to guarantee success when pitching for business finance, but that doesn’t mean you can’t give yourself an advantage by presenting your case in the best possible way.

Many lenders, including Barclays, will often use the CAMPARI framework to assess your application. If you can satisfy this model in your pitch for funding, you’ll go a long way to getting a positive outcome. And don’t forget to add in anything that makes your business stand out, for example if you’ve won awards or been particularly successful in a certain area. Think about whether there’s anything relevant that the bank might not ask about but that could put your business in a stronger position.

C – Character: This is your chance to shine, and in business financing terms that means convincing investors that you – and your business – have the professionalism to look after their money and give them a return. That can incorporate many things, from the confidence you have in your idea, to your business’s record in making loan repayments. Having a strong brand reputation can go a long way.

A – Ability: You need to show clearly that you and the people in your business have the knowledge and ability to generate growth from any funding that’s provided. Your track record as a business is likely to be considered, as is the quality of its products or services and the strengths of the management team. Your staff could also play an important role – having good people in key positions helps to give lenders confidence, so consider taking on outside expertise if you need to bring additional expertise into the business.

M – Means: Is your business equipped to deliver on your growth ambitions? This is where the strength of your business plan comes into action. You should try to show where you have, or will have, a competitive advantage in the market. You should also prepare detailed financial reports with best and worst-case scenarios, future growth projections, prior performance records and in-depth company expenditure.

P – Purpose: Lenders will want to know what the money will be used for and how it will be used to generate a profit or improve the business’ financial situation. This part of the framework is also where prospective investors will consider whether the borrowing is in the best interests of the business, whether there’s a good enough reason for requesting it and whether it fits in with their own lending guidelines.

A – Amount: How much are you asking for, and is it the right amount for your stated requirements? Potential investors will want to see how you have decided on the level of funding you are asking for, how it aligns with your financial projections and what the business’s own contributions to the project may be. It’s worth taking the time to scrutinise this properly. While it’s a good idea to be prudent, asking for too little could be counter-productive if it means your plans are judged as being less likely to succeed.

R – Repayment: You’ll need to be able to show concrete evidence that you will be able to afford any repayments, or provide solid projections that indicate how you’ll be able to pay back your investors over time. Lenders will be looking for details on the source of the repayment money and will likely be considering areas such as the health of your cash flow, your profit margins, and if the repayment period is acceptable.

I – Insurance: In many cases it’s important for you to be able to show that you have a fallback plan in case things go wrong. Do you have another source of repayment? Has any insurance been taken out that would allow you to repay the financing if you fall short of your targets? If you’re securing the finance on an asset, make sure you have an up-to-date valuation to show.

Opportunities for growth

Recent data shows that 70% of SMEs would rather grow more slowly than borrow to grow faster3. While the financial and other obligations of business funding need to be considered carefully, so should the opportunities it can provide.

Successful borrowing can often be positive for the long-term health of a business, helping it to develop and ultimately become much stronger.

And for many businesses with ambitious growth plans it’s likely that, at some stage, they will consider taking on financing to help achieve their aims.

That’s certainly the case for glass artist Ray Youngs, who found that borrowing money from Barclays gave him much more than just the financing he needed to move his business, Skullpture Glass, to larger premises.

I didn’t realise that kind of help was out there, and certainly not from a bank.

Ray Youngs

Owner, Skullpture Glass

Working closely with the bank also gave him the confidence and contacts to put additional growth plans in action, including exploring further expansion through new international opportunities.

To find out more about Ray’s story, watch our video

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Important information

These products are provided through a referral to Barclays Bank PLC.

Some products may be available to clients of Barclays Bank UK PLC through referral to Barclays Bank PLC. Referred products will be provided and administered by Barclays Bank PLC. A portion of the revenue generated by referred products may be shared with Barclays Bank UK PLC. Alternative service providers in the market may offer similar products.

We’ll refer you to MarketInvoice, which is a separate legal entity to Barclays. We have a commercial interest in their business. If your application is approved, their product will be provided and administered by MarketInvoice and you’ll be asked to accept their terms, conditions and operations. A portion of the revenue will be shared with Barclays Bank UK PLC.

Barclays Bank UK PLC. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 759676). Barclays Bank UK PLC adheres to The Standards of Lending Practice which is monitored and enforced by The Lending Standards Board. Further details can be found at www.lendingstandardsboard.org.uk.